Trade Desk Thoughts from the ECB

The Governing Council decided to leave the key ECB interest rates unchanged

The latest information confirms that towards the end of last year economic activity in the euro area continued to expand

The euro area has been benefiting from a turn in the inventory cycle and a recovery in exports, as well as from the significant macroeconomic stimulus

Low capacity utilization rates are likely to dampen investment

Unemployment in the euro area is expected to increase somewhat further

Concerns remain relating to a stronger or more protracted than expected negative feedback loop between the real economy and the financial sector

Euro area annual HICP inflation increased further in December 2009 to stand at 0.9%, after 0.5% in November

Inflation is expected to remain moderate over the policy-relevant horizon, with overall price, cost and wage developments staying subdued

Inflation expectations over the medium to longer term remain firmly anchored

The annual growth rates of M3 and loans to the private sector were negative in November, standing at -0.2% and -0.7% respectively

M3 and credit growth are likely to remain very weak or negative for some time to come

Banks have continued to reduce the size of their overall balance sheets, mainly through downsizing the assets held vis-à-vis other banks

We will continue our enhanced credit support to the banking system, while taking into account the ongoing improvement in financial market conditions and avoiding distortions associated with maintaining non-standard measures for too long

Euro area governments are faced with high and sharply rising fiscal imbalances.

High levels of public deficit and debt would place an additional burden on monetary policy and undermine the credibility of the provisions of both the Treaty on European Union and the Stability and Growth Pact

The Governing Council therefore calls upon governments to decide and implement in a timely fashion ambitious fiscal exit and consolidation strategies

Sound balance sheets, effective risk management, and transparent as well as robust business models are key to strengthening banks’ resilience to shock

Related

ECB president Mario Draghi pulled out a bazooka today announcing asset purchases. The ECB also cut interest rates to 0.05% (from 0.15%) while offering negative 0.2% on funds parked with the ECB. Here are some details from the ECB Announcement.

The bottom just fell out of the euro. This is all happening as ECB president Mario Draghi speaks about his latest monetary policy decision. "Looking ahead, our monetary policy stance will remain accommodative for as long as necessary," said Draghi in his introduction. "The Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time."

The ECB did the unexpected today, cutting the interest rate to .25% from .50%.
Here is the ECB press release.
7 November 2013 - Monetary policy decisions
At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:

In a surprise for markets, Mario Draghi gave (extended QE) and took away (tapered purchases) the punchbowl in what we are sure will be described as 'significant additional easing' even though bond traders are clearly disappointed. Having had 45 minutes to judge the market's reaction (steeper curves, lower EUR, higher bank stocks), we wonder what tape-bomb he will drop during the Q&A to spoil the party.
Full press release:
Monetary Policy Decisions

WASHINGTON: World financial markets have calmed after turmoil earlier this year, but more needs to be done to ensure global financial stability amid slowing growth, weak commodity prices and worries about China's economy, the International Monetary Fund warned on Wednesday. The IMF said in its latest Global Financial Stability Report that financial system risks have risen since the last report in October and market turmoil could easily recur and intensify if no action is taken to clean up bank balance sheets, particularly in China and Europe.

We suggest ECB President Mario Draghi has his work cut out for him today. As the entirely political catalyst for Greece's crescendo-like bailout capitulation, he will - we hope - be questioned long and hard on his actions over the last 2 weeks (and going forward) with regard the increasingly 3rd world nation. As Bloomberg's Richard Breslow notes, Draghi needs to help calm a still tense situation. The only way he can do this is with as much tranquility as he can muster, make sure everyone knows he is still prepared to do whatever it takes.

Today the ECB left interest rates unchanged and hinted at future bond purchases but also warned "Governments must stand ready to activate the EFSF/ESM".
The Financial Times has details in Draghi prepares for fresh bond buying